1. Long Term Ad Effectiveness Measurement --- The Single Source Solution
September 19, 2014 – Marketing Research Council
Dave Poltrack
Chief Research Officer
CBS Corporation
President
CBS Vision
Leslie Wood
Chief Research Officer
Nielsen Catalina Solutions

2. Agenda Background New Work – Methodology Case Study – Five Brands
New NCS Solution – Long Term Effects

3. Background – Original Study
Ad Works I (1991) showed long-term effect of advertising to be the 2x short-term sales effect
Still used anecdotally
Suggests only half the value of advertising is counted by mix models
Advertising may get fewer marketing dollars vs. promotion, trade, etc.
Allows for no variation by campaign, medium, brand/category, or long-lasting branding effects
It’s time for a new look!

4. Background – Current Research
NCS conducted a five-brand study, including Kellogg’s, on the Long-Term Effect of Advertising
Presented at ARF 9.0 June 2014
Sponsored by CBS
Marketing Accountability Standards Board (MASB) – Study with four brands, using the NCS Single Source Methodology (Summer 2014)
New CRE (Center for Research Excellence) Study: Towards A More Complete Measure Of Advertising Value and ROI
Study will lead advertisers to new, valid methods of assessing long term value
Expert Interviews
Literature Review
“Good Practices”
Case Studies
White Paper
Process

5. Value of Long term effects
Over the past 25 years the balance of spending between advertising and promotion has shifted dramatically
In part due to ability to measure the impact of promotion
Advertising has been evaluated only on the short-term
While studies 20 years ago showed that the long term is twice the size of the short term!
“Measurement and analysis that consider only short-term impact may put advertising at an unrealistic disadvantage when allocating marketing resources to maximize long-run profitability”
Hanssens 2011
Hanssens, D. M. (2011). "What Is Known About the Long-Term Impact of Advertising." 1-19 MASB What is know Series

6. Measuring the Long Term
“If an advertising test was successful in Year 1, there would continue to be long-term effects of the advertising which, over the course of the next two years, would amount to a full doubling of the first-term impact.”
Adworks 1991
Benefits of Having Actual Long Term Measured:
Having real measures provides insights into what drives long term
Insights drive better decisions
Better decisions drive higher effects
Having real measures provides insights into budget setting
Information Resources Inc. (1991) “How Advertising Works”

7. Theory – Brand Equity Advertising is a key driver of brand equity
Brands with loyal customers face less pressure to reduce their prices and therefore enjoy a price premium. Together, quantity and price premiums reflect a brand’s long-term health.
Lodish, Mela 2007
Advertising is a key driver of brand equity
Brand equity embodies the concept of the long term brand value
While immediate increases in sales arising from discounts are striking, the effects of discounts and of other components in the marketing mix—such as advertising, new products, and distribution—can be understood only over the long term.
Lodish, Mela 2007
Lodish, L. M. and C. F. Mela (2007). "If Brands Are Built over Years, Why Are They Managed over Quarters?" Harvard Business Review.

8. Methodology

9. Methodology – Then and now
Original Methodology
NCS Methodology
Timing
Short Term
Lift over a one-year period
Lift with a 4-6 week post period
Long term
Lift after end of one-year period – out an additional 1-2 years
Lift after post period – one-year to five-quarters after post period
Multiplier
Original 2 years /
measured short-term
NCS 1 year or 5-quarters /
Method
Short term Lift
Matched HHs
Long Term Lift
Continued value of moving HHs from non-purchase through trial and deeper repeat
TV Exposure
Actual Exposure
Purchase
Scanner panel
Frequent Shopper Panel
Control for Long Term exposure
Assume continued comparable advertising

10. Critical Measure Identified: Trial and Depth of Repeat
Trial is identified first:
First time brand buyer in past X period (6 months for these brands)
Among non-triers – Depth of Repeat
Count of consecutive brand purchase when category was bought
This was capped at 6 to reduce the long tail 2
The foundation of this methodology is single source data. This is a matched HH test where How Advertising Works was a matched market test. Using matched HHs allows us to find key discriminating buying patterns that influence the future, long term value of advertising.
The key discriminating variable we identified for long term was Trial and Depth of Repeat. This is a combination of first identifying Trial – based on not having bought the brand in a fixed period prior to the purchase in question. For this study we chose 6 months so that we would have the longest “future” to measure. Then among non-triers or repeat purchases, each purchase was numbered based on the count of consecutive brand purchases.
As you can see from this chart – black is competitive purchases and red are brand purchases. The first 6 months are a warm-up period where we keep track of brand purchases. In this case the first brand purchase was shortly after the warm-up period and is labeled “T” for Trial. The purchase after that is the second brand purchase, even though they bought a competitive purchase. Since the next two category purchases did not include the brand, these are reset back to zero. Then we see two purchases, reset to zero and then a continuous build from 1 up to 6. Note that we cap the counting at 6 to reduce the long tail of consecutive purchases. 3 2 5 1 1 6 4 2 6 6 T

11. Long-Term Measurement Design2.
Short-Term Effects
Period 3.
“Future” Period 1.
Warm-up Period
The key to our analysis is a three part approach: we start with a warm-up period to identify trial, then conduct an analysis of the short term effects and then build the long term based on the “future” purchases after the short term. The short term identifies the HHs that were exposed to the ad prior to purchase as well as the lift among those HHs. The future period quantifies the value of those short term lifts out into the future.

12. Long Term Methodology Summary
Identify each purchase exposed within 28 days in the analysis period and tag for Trial or Depth of Repeat.
For each purchase time-align that purchase as “Week 1,” and measure the weekly “future” purchases for that HH.
Average weekly brand dollars per household.
The incremental value of a HHs moving up the chain of repeat is calculated and summed across the entire “future” period.
This total incremental “future” value is divided by the sales in “Week 1” to get the multiplier.
[Click to advance to remove lines and replace with areas]
The steps to quantifying the long term multiplier are as follows:
Tag each purchase for Trial and Depth of Repeat and determine if that HHs was exposed prior to that purchase.
Then time align all those purchases as Week 1 and measure each future week’s brand dollars.
The average dollars per HH summed across all weeks gives us the additional dollars that HH would spend as a result of being in a higher purchase depth of repeat.
[click]
The area between one depth and another is the value of being in that higher depth of repeat.
To get the multiplier – we then take that total future incremental dollars and divide by the short term dollars.

13. Long Term Methodology Summary
Identify each purchase exposed within 28 days in the analysis period and tag for Trial or Depth of Repeat.
For each purchase time-align that purchase as “Week 1,” and measure the weekly “future” purchases for that HH.
Average weekly brand dollars per household.
The incremental value of a HHs moving up the chain of repeat is calculated and summed across the entire “future” period.
This total incremental “future” value is divided by the sales in “Week 1” to get the multiplier.
[Click to advance to remove lines and replace with areas]
The steps to quantifying the long term multiplier are as follows:
Tag each purchase for Trial and Depth of Repeat and determine if that HHs was exposed prior to that purchase.
Then time align all those purchases as Week 1 and measure each future week’s brand dollars.
The average dollars per HH summed across all weeks gives us the additional dollars that HH would spend as a result of being in a higher purchase depth of repeat.
[click]
The area between one depth and another is the value of being in that higher depth of repeat.
To get the multiplier – we then take that total future incremental dollars and divide by the short term dollars.

14. What are we measuring?
In essence, we are measuring the future value of moving a HH into trial or to a higher depth of purchase among exposed HHs
This is a form of customer lifetime value, but only measuring that value out for one-year or five-quarters.
The value of moving an exposed HH into trial or a higher depth of repeat is weight averaged by the degree to which the short-term effects drive the movement into trial and deeper repeat.
This method does not measure the direct value of the advertising into the future. The direct value of the advertising is embodied in the short-term effects.

15. Kellogg’s Special K
Jeff will take you through Kellogg’s Special K Case study

16. Kellogg's Special K Short-term Effects:
Special K’s advertising drove incremental gains across all segments, with the highest lifts being in the most loyal segments with the highest depth of repeat
This slides shows the Lift between Exposed and Non-exposed HHLDS in the Short Term.
From a short term perspective, Special K TV Ads drive gains across all segments with Highest Lifts being among Brand Loyals (3,4,5, 6+ Depth of Repeat)
Trial Lapsed increasing Loyalty

17. Kellogg's Special K Short-term Effects:
Translating lift into generated dollars shows the largest gains are among the lapsed and trial purchases since these are the largest segments (shown on different scales)
Total Category Dollars
Brand Dollars Generated (Lift)
Now when we look at Dollar Returns, the less Loyal Segments are generating the most Dollars simply due to the size of the segments.
Special K ads resonate well across all segments, including Switchers and Brand Loyals
And Especially well with Brand Loyals where Dollars Lifts are more than their Fair Share of Category Dollars
[Note that we then stacked the Brand Dollars Generated into a chart on the far right of lifts.]

18. Kellogg's Special K Short-term Effects:
Translating lift into generated dollars shows the largest gains are among the lapsed and trial purchases since these are the largest segments (shown on different scales)
The lifts are then stacked to show the Short-term Effects
Stacked
Lift
Total Category Dollars
Brand Dollars Generated (Lift)
Now when we look at Dollar Returns, the less Loyal Segments are generating the most Dollars simply due to the size of the segments.
Special K ads resonate well across all segments, including Switchers and Brand Loyals
And Especially well with Brand Loyals where Dollars Lifts are more than their Fair Share of Category Dollars
[Note that we then stacked the Brand Dollars Generated into a chart on the far right of lifts.]

19. Special K Long Term
Current Week reports week where short-term effects are measured
“Future” period measures weekly dollars for each HH influenced to move their depth of repeat up one step – from zero to Trial or Depth of Repeat 1, or Depth of Repeat 1 to 2, etc…
The distance between 5 and 6+ is larger because it includes the 7th, 8th, … 142nd, 143rd…
When we look at Long Term – the Bar or 1st week represents the Short Term
Future weeks represent Special K Dollars per HHLD 29+ days after the TV spot
The Delta between the segment lines where the Gap is the largest is where TV has the largest long Term impact – which is Switchers (trial -1) and Heavy Brand Loyals (5 – 6+)

20. Special K – “Future”
The colored area is the value of moving a HH from one depth of repeat into the next higher segment (difference in areas under the curves)
The growth in the curves during the first few weeks reflect the purchase cycle for the brand.
This next chart shows better visually & in color the last slide
Here you can better see the drop off after the initial purchase being driven by either purchase cycle or pantry loading
You can also better see the long term gains resonating with Switchers & Heavy Brand Loyals

21. Multiplier What is the short-term multiplier to get to Long-Term?
Now to get at the multiplier…. You take the difference between the Long Term & Short Term, using Short Term as the denominator… you get a Multiplier impact for each Segment
Here again you can see Special K TV Ads have greatest Long Term impact on Brand Switchers (1) and Heavy Brand Loyals (6+) - with an aggregated Multiplier of 2.5.
Trial Depth Total
Multiplier to five quarters (65 weeks)

22. Five Brands – Long Term Soft Drink B
Note that the value of Trial and 1 is extremely high. 6+ Depth of Repeat is also high due to the large, thick tail of repeat. This large thick tail is indicative of high brand loyalty
High brand loyalty also translates to a large value of driving trail and switching.
We decided it was important to put these findings into some context, so we picked four more brands: two with known high loyalty and brand equity and two with slightly different kinds of lower loyalty.
Soft drinks have extremely strong loyalty. Many consumers claiming that they will only drink one brand. We see short term gains that were substantial for trial and first use, and then substantial for 5 and 6+ depth. The long term payout is similar. Very strong for 6+ and large amounts for trial and 1.
We also see almost no drop in week 2 – soft drinks have a very short purchase cycle.

23. Multiplier What is the short-term multiplier to get to Long-Term?
When we look at the multipliers – there is a very high multiplier for high repeat, probably due to the extreme nature of the long tail for this brand. A brand with such high loyalty has a very high long term multiplier. On average across all ads – a 3.5
Trial Depth Total
Multiplier to five quarters (65 weeks)

24. Five Brands – Long Term Soft Drink C
Soft Drink C also has extremely high Trial and Depth of Repeat is again high due to the large, thick tail of repeat.
Soft Drink c is a different kind of soft drink. It has a unique flavor. What we see less trial, but even larger return for reminding users to drink this brand, and a large payout for pushing repeat.

25. Multiplier What is the short-term multiplier to get to Long-Term?
When we look at the multipliers, trial is extremely large – but remember, there was very little short term trial. Across all ads the multiplier is 2.61.
Trial Depth Total
Multiplier to five quarters (65 weeks)

26. Five Brands – Long Term Boxed Prepared Dinner D
This is a smaller brand than the others measured so far. This creates much more volatility than seen in the other brands.
We chose a Boxed Prepared Dinner because there are many choices of what to serve for dinner and this category has been primarily driven by deal.
That behavior has made the long term sales very small.

27. Multiplier What is the short-term multiplier to get to Long-Term?
The long term multiplier for this brand is 1. The 6+ depth is so tiny because there were virtually no purchases in the 6+ group. Interestingly, when advertising promoted trial, there was a decent payout – perhaps these purchases weren’t driven by deal.
Trial Depth Total
Multiplier to five quarters (65 weeks)

28. Five Brands – Long Term Toothpaste E
This product takes quite a bit of time to “catch-up” and then begin to decay. This product has a much longer purchase cycle than the other brands measured.
The last brand we looked at was toothpaste. In this category there is strong loyalty to a short list of brands. This is one of those. However – because consumers are happy to chose any one of several brands, there aren’t many long term effects. Consumers are happy to buy whichever of the key brands is on sale.
Since toothpaste has such a long purchase cycle, we see that it takes 4-5 weeks to build up to a steady state of weekly dollars.

29. Multiplier What is the short-term multiplier to get to Long-Term?
Toothpaste has a very low multiplier of The largest value comes from the truly loyal. Perhaps those are the customers that have delighted in one of the improvements toothpastes have made in the last few years.
Trial Depth Total
Multiplier to five quarters (65 weeks)

30. Adworks Long Term Effects Results Carry-Over Year Two (First Year After Campaign)
4-6 4

31. Adworks Long Term Effects Results Year Three Effects (Second Year After Campaign)

32. Advertising Value
The NCS multiplier estimates the long-term value, which requires adding the short-term value back in to get the total value of advertising. The total values for these five brands range between 1.8 and 4.5.
Short-term Long-Term = Total Value
How Advertising Value
Traditionally Works = 2
NCS’s View on Short-term Long-Term = Total Value
Advertising Value
Soft Drink Brand B = 4.5
Soft Drink Brand C = 3.6
Kellogg’s Special K = 3.5
Boxed Prepared Dinner D = 2.0
Toothpaste E = 1.8
Multiplier on 1-Year*
Multiplier on 1-Month**
Range # studies(How Ad Works)
Brand F Example
1.5 x 1.2 = Long Term Short Term 1.2 = Total Value 3.0
NCS Long Term Multiplier = 1.5; Short Term = 1.2
* 3-year LT Multiplier on 1-year ST
** 1-year LT multiplier on 1-week sales preceded by ad exposure within last month

33. Conclusions
Advertising does have a long term effect and it can be measured using true single source methodology 1
The long term effect varies based on the brand: The long term multiplier varies from a low of .8 to a high of 3.5! 2 3
What’s Next on the Roadmap??:
Phase 2 will work to better define short and long-term period definitions to align the multiplier to be operationally utilized with marketing mix model results
More brands, to develop a deeper understanding including non-CPG
Does it vary by media, category, brand, creative, levels of deal?
So, what have we learned!
1 – Advertising does have a long term value, and that value can be measured with single source data.
2 – We also learned that the multiplier can vary tremendously! Think about the brands you work on. Where does your brand fit. If the multiplier is a 1 – are you giving advertising its fair due. If it is higher – a 2,3 or 4 – should you be spending much more on advertising.
What can you do to increase the multiplier? Is it influenced by different kinds of creative? How does deal diminish the multiplier?
3- We also learned that when we use matched HHs as compared to matched markets we see even higher long term effects. While How Advertisng Works reported a multiplier of 2 – they meant 1 for short term plus 1 for long term. We are calculating the long term all by itself – without adding the short term to the long term. So, each of our values is even higher, although several of our brands do show levels of approximately 2.
What is next? First we need to measure more brands. We need to build a deeper understanding of what influences the long term value and how can it be increased. We also need to move outside of CPG. To help make that happen, here is Dave to the rescue!

34. Thank You